Is Compromise Possible for NHL Revenue-Sharing?

The NHL and NHLPA have proposed two different proposals to improve revenue-sharing. Compromise may be necessary as this issue hold implications down the road for the league and its players.

One of the most important issues in the current CBA talks between the NHL and NHLPA – perhaps the most important – is the distribution of revenue.

Puck Daddy Greg Wyshynski recently reminded us that, lost amid the hype of the NHLPA’s recent CBA counter-proposal (of which the basis was enhanced revenue-sharing), the NHL had in its initial proposal also proposed to improve its revenue-sharing system .

The league is apparently proposing to loosen the stiff restrictions which currently limits which clubs qualify for revenue-sharing to include any team which requires it, rather than the bottom fifteen “revenue generators”.

But as Wyshynski observes, the NHL hopes to pay for this by slashing the players’ share of hockey-related revenue, believing it stands a better chance of achieving this goal than in convincing the big market team owners to share more.

The league is also concerned the PA’s proposal would hurt more clubs than it would help, especially given the PA’s proposal sees the players accept only a modest decrease in HRR from 57 to 54 percent, compared to the 43 percent sought by the league.

As Wyshynski noted, it’s difficult to determine which side is proposing the better system without fully knowing the numbers involved. As he aptly puts it:

“The good news for us: They both want expanded revenue sharing to teams that don’t currently qualify for it.

The bad news for us: They have significantly different theories on how to effectively accomplish this.”

It’s understandable why the big market owners are reluctant to consider sharing more of their revenue with their peers in struggling markets. They don’t feel they should engage in charity (or worse, something that smacks of – gasp! – socialism) bolstering those teams which are poorly run or in markets where the NHL may be having difficulty “expanding its footprint”.

Yet these big market owners, or their predecessors, were responsible for many of those teams coming into existence in the first place. After all, they voted for those teams to join the NHL back in the 1990s, and happily pocketed their share of the expansion fees.

Despite their resistance to revenue sharing, they’ve been helping to keep the Phoenix Coyotes in their current location since the club went bankrupt in 2009.

The league took over ownership of the Coyotes, and for the past three years have unsuccessfully attempted to find a prospective buyer willing to keep the club in its current location.

Granted, it’s not “revenue-sharing”, but it does mean the big market owners, whether they want to or not, are doing their part to the Coyotes afloat. What off-sets that pain is the league gets its money back thanks to an “arena management fee” paid by the city of Glendale to off-set the operating costs.

If the Coyotes were the only struggling team the league has had to assist in recent years, it would be considered an anomaly, but that’s not the case.

Last year, New Jersey Devils owner Jeff Vanderbeek took a $10 million loan from the NHL to assist in paying down debts to his creditors.

Of course, these instances are different than sharing a percentage of revenue on a yearly basis with struggling markets, but without an improved system of revenue sharing, the NHL could be seeing more instances over the next decade where they’re forced to keep struggling markets afloat.

If the league is serious about bolstering its struggling franchises, some form of improved revenue sharing seems the only realistic way to achieve this. The question is, which side offers the best system to achieve this goal?

Based on the available information, it would seem a compromise – whereby the players agree to a reduction down to around 50 percent of HRR, while the big market owners agree to kick in more – is the only logical solution.

It could potentially benefit both sides, potentially assisting those struggling markets gain some footing toward eventual self-sufficiency (or at the very least, reduced dependency upon revenue-sharing) whilst ensuring jobs for the NHLPA membership.

Accepting a 50-50 split, however, isn’t as simplistic as it seems. Stu Hackel at SI.com noted NHLPA director Donald Fehr pointed out to reporters last week the way HRR is currently defined, the players are already around a 50-50 split, hence the reluctance on their part to accept a significant reduction in their revenue share.

Failure to implement an improved system of revenue-sharing could result in more teams sliding into bankruptcy (like the Coyotes), struggling to stave it off ( like the Devils), or more owners throwing in the towel, creating the possibility of more clubs facing relocation or contraction.

While the league has in the recent past found new owners for struggling clubs (Ottawa, Buffalo, Tampa Bay, Florida, Nashville), it hasn’t always been successful.

The Atlanta Thrashers were sold and moved to Winnipeg when no prospective buyers could be found willing to keep the club in Atlanta. It’s widely expected if no new owner can be found for the Coyotes, the club could be sold to an buyer who’ll relocate the team, with Quebec City and Seattle cited as possible alternatives.

So, who cares? Better to move those teams to better markets rather than waste time keeping them in money-losing, non-traditional hockey markets, right?

The NHL preferred to keep the Thrashers in Atlanta because of its market size, which is also why it is fighting so hard to keep the Coyotes in Phoenix. The belief is if hockey could succeed in those markets, the NHL would reap far greater rewards over the long term that it could in smaller, traditional hockey markets.

As for relocating franchises, the truth is there aren’t many available markets. Sure, Quebec City seems a certainty, but other proposed markets are less so.

Seattle has been mentioned in recent months, but until a new arena is constructed, the NHL won’t consider moving a team there.

Southern Ontario – especially the Greater Toronto Area – can easily afford a second NHL franchise, but good luck battling Maple Leaf Sports and Entertainment over that. That’s why Hamilton still doesn’t have an NHL franchise, and probably never will.

Kansas City has an NHL-ready venue, owned by AEG (the owners of the Los Angeles Kings), meaning the league would have to find an owner willing to split arena revenue with AEG, in a market where the NHL failed in the 1970s.

Las Vegas has been mentioned, but again, no arena, and no prospective buyer stepping up.

Returning to Hartford has been suggested, but no one has stepped forward with a serious proposal.

In other words, the league might be able to move a couple of its money-losing franchises to better markets, but it can’t move them all.

That leaves the “C” word, the one the league brushes aside whenever it is mentioned: contraction.

Of course, the league doesn’t want to cut teams. Neither, for that matter, does the NHLPA, as it would mean the loss of NHL jobs for a number of its membership. That’s a key reason why the PA is pushing so hard for enhanced revenue sharing.

Whatever method is eventually accepted, it must be a system which can ensure the rising tide of revenue truly floats all boats. Failing to properly address this issue will only result in significant problems for the NHL over the next decade.

1 Comment

michael
on August 23, 2012 at 5:37 pm

my wish is this and im not kidding: that the whole league shuts down until 2022 and re-open with 12 teams.

having said that, it’s true that somewhere along the line hockey’s lost its way. it’s just not fun to watch guys who would rather carry an attache case (to a union meeting) than a puck.

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